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Australia-based Sims Ltd., which operates scrap yards and electronics recycling facilities in North America, the United Kingdom, Australia and New Zealand, reports its underlying earnings before interest and taxes (EBIT) fell by 85 percent in the second half of 2023 compared with the first half of the year.
Sims characterized the second half of last year, which is the first half of the company’s 2024 fiscal year, as consisting of lower metal trading margins and inflationary pressures, though the company’s potential losses were mitigated in part by cost control measures.
“Challenging market conditions prevailed across all metal segments, with variations observed between, and within, geographic regions," Sims Group CEO and Managing Director Stephen Mikkelsen says.
Mikkelsen says the Sims Lifecycle Services (SLS) electronics recycling segment performed well, delivering solid EBIT, repurposed unit growth and market share gains in the half-year recently completed.
The company’s sales revenue in the United States increased by 14 percent in late 2023 compared with the first half of the year. However, its underlying EBIT, which had been $24.8 million in the first half of 2023, was instead a loss of more than $5.7 million in late 2023.
“Challenging export conditions and intense competition for infeed squeezed margins,” Sims says of scrap market conditions in the U.S. from July through December of last year.
In the U.K., the company says its strategic review of assets process could include the consideration of nonbinding proposals by the end of this month.
Sims says the U.K. steel and scrap market is transitioning to domestic metal recycling consumption driven by electric arc furnace (EAF) announcements and that its U.K. Metal business unit is well-positioned to capitalize on this shift.
Globally, Sims' revenue climbed by more than 7 percent in the second half of 2023 compared with the first, rising to about $2.7 billion. However, it managed just $8.8 million of EBIT from that revenue in the recently concluded six-month period.
“We maintained a robust balance sheet, with adequate borrowing capacity and manageable debt levels, positioning the company favorably for future growth opportunities,” Mikkelsen says.
He says the company's North America Metal business unit and the SA Recycling joint venture (JV) continue to engage in strategic acquisitions.
Regarding SA Recycling, Sims indicates the JV showed considerable resilience thanks to its strong domestic sales and procurement of scrap at the source.
Globally, the company's metal trading margin decreased by 2.6 percent, or 5.4 percent in constant currency, in late 2023, “reflecting the challenging trading conditions across all markets. The trading margin percentage for the period was 18.4 percent, compared with a 20.4 percent margin in the prior six months.”
Sims says it remains confident in the business’ medium and long-term fundamentals, adding, “In the short-term, underlying EBIT is expected to improve” in the January to June 2024 time frame.
“Initiatives have commenced to increase both domestic sales channels and unprocessed material in the United States, [and] demand for scrap in the U.S. is expected to remain robust, supporting prices.”